Marlins go to market swimming in red ink

Whoever buys the Miami Marlins is getting a throwback team: one burdened with significant financial losses.

Teams in the major sports leagues have largely gotten their financial homes in order in the last decade through better collective-bargaining agreements, lucrative TV contracts and better attendance. It is the main reason so few teams have sold recently: Owners are not facing red ink like they did in the past.

Payroll jump in Miami

Year

Payroll
(in millions)

Attendance (in millions)

2017

115.3

NA

2016

69.3

1.712

2015

84.6

1.752

2014

52.8

1.732

2013

35.9

1.586

2012*

118.0

2.219

2011

56.9

1.520

2010

57.0

1.535

* Marlins Park inaugural year
NA: Not available
Sources: USA Today, SBJ Research

But the Marlins, who have been near the bottom in MLB attendance for many years running, are set to lose tens of millions of dollars this year, and as major accelerators kick in next year on certain player contracts, the losses could skyrocket, financial sources and those close to the team said.

These sources say it is likely the team, even with revenue sharing from MLB, could lose in the high eight figures if not low nine figures in the next few years.

“We have always said we have had losses,” said David Samson, president of the Marlins, who declined to comment on specifics.
There are several groups looking at the team, including one led by biotech hedge fund executive Wayne Rothbaum, who is advised by Goldman Sachs. Former Florida Gov. Jeb Bush is trying to put together a group, as is New York Yankees legend Derek Jeter. Bush and Jeter would be the face of their groups, but the real money would have to come from elsewhere.

A deal to sell to a group led by Josh Kushner fell through, reportedly because team owner Jeffrey Loria could become ambassador to France and Kushner’s brother is a senior adviser in the White House. Many insiders suspect the real reason is the real estate heavy Kushner was not liquid enough, and the Marlins’ price so far is too high.

The Marlins have been asking $1.6 billion, which appears high given the team’s poor financial condition. That said, they are the only game in town for now if you want to buy a controlling stake in a big four sports team.

The market for teams is quiet because team owners, thanks to several factors, have little reason to sell.

“Existing team owners are not in need of liquidity,” said Rob Tilliss, founder of sports investment bank Inner Circle Sports. “Second, revenues have grown dramatically through media rights renewals, digital growth, more new venues coming on line and the continued popularity and fan engagement in sports, which has created a strong business model. Last, the leagues have renegotiated their collective-bargaining agreements, which has created long-term stability for teams.”

That gives the Marlins, even if they have only about 5,000 season-ticket holders, as some sources said, scarcity value. A source close to the team added other reasons why a high price is justified, among them that the departure of owner Jeffrey Loria — unpopular after securing public funding for a new stadium and then selling off key players — could boost ticket sales.

In addition, the team’s local media rights deal with RSN Fox Sports Florida/Sun Sports expires in a few years. The current agreement pays $18 million a year, a figure that would be expected to rise with a new deal.

That said, finance sources don’t see the value of the team above $1 billion, especially in light of the losses that a new owner would shoulder.

Consider Samson’s comment that the Marlins have always lost money. Add to that the big increase in payroll this season to $115 million (see chart), with no indication that the attendance doldrums of past years are about to change.

Then take Giancarlo Stanton’s 13-year, $325 million contract signed after the 2014 season. This year he is due $14.5 million, the highest of the first three years of the contract. But starting next year that figure jumps to $25 million, his lowest annual pay until the contract ends in 2028.
“You could look at that contract and pinpoint the year Loria would sell,” one south Florida sports official said.

The Marlins host the All-Star Game this year, and the conventional wisdom in South Florida circles is that Loria would like to keep the team at least through that event.

The team confirms it is in sales talks, but declined to comment on with whom.